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Euro falls as Renzi resigns following Italian referendum ‘No’ vote, but major declines mitigated by Austrian election result

The Eurozone leapt into the spotlight this Monday morning, with Italy’s decision to vote ‘No’ to historic constitutional reforms, and the subsequent resignation of PM Mario Renzi, creating a fresh headache for the euro.

With more than 60% of the Italian public voting against his proposed reforms, Renzi became the latest global leader to disappear in ignominy this morning, sparking fears about the strength of the European Union as a whole. This referendum was seen more as a judgment call on Renzi’s premiership than the reforms on offer; by rejecting the PM Italy has displayed the same kind of anti-establishment populist sentiment that has defined 2016 for the UK and US. Beyond Renzi’s resignation the consequences of this vote are hard to read, though it does potentially open the door for anti-EU parties like the Five Star Movement AND presents another blow to Italy’s incredibly fragile banking sector.

As is to be expected the euro bore the brunt of the initial market-reaction, briefly slipping to a 20 month low against the dollar. Now, however, the currency seems to have calmed down; it is back above $1.06 against the greenback, while against the pound it has lost just 0.3%. The defeat of the far-right Norbert Hofer by Alexander Van der Bellen in Austria provided a chink of light for the euro, preventing its more excessive losses from sticking around for too long.

While the euro has fallen, the reaction of the Eurozone indices suggests that they aren’t too worried about the region’s current political situation. The DAX rose 100 points, recovering most of the losses it incurred at the end of last week, while the CAC jumped 0.4%. Even the FTSE managed to eke out a mild 0.2% rise despite the gains made by the pound.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Connor Campbell

Connor Campbell

Connor joined Spreadex in 2014 as part of a newly expanded financial analyst team after graduating from the University of Southampton with an MA in English. His focus is on providing Spreadex's customers with up-to-date and informative news, and is responsible for the market analysis found on the Spreadex website.

Connor produces three daily market updates, a daily stock earnings preview, a weekly financial market preview piece every Friday, a round-up of all the big financial stories making the weekend press every Monday morning and regular stock market features.

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